BP: what should we expect?

What role we expect the major oil and gas companies to play in this day and age?

Any discussion on climate change is incomplete without the discussion of the oil majors that are right in the center of the issue. The oil majors have mostly been criticized for the externalities the industry has produced over the course of time and the lack of recognition the oil majors have given to the issue. In addition, any change in regulations related to climate change directly affects the business assumptions of these companies.

 

Sustainability is most definitely of primary concern and it is widely accepted that global warming caused by the GHG is likely to have severe consequences if left unchecked. However, in such discussion we must keep certain perspectives in mind. The average per capita energy consumption of US (2013) is 6916 KOE; versus average per capita energy consumption of India (i.e, 1/6 of world population) is 606 KOE. To add to this, per capita consumption of energy in India is greater than atleast ~30 countries (data for ~80 countries is not available) [1]. Considering Energy consumption per capita is a fair reflection of general standard of living, it should thus not be surprising that 17% of world population is living without any electricity and 38% without gas connection [2]. This provides the background of the energy requirement in the world. It also reflects the lack of affordability for basic needs for a significant population and thus how crucial it is for energy to be affordable if we hope to improve the living standard of a vast majority of the population. Off the 2015 world energy consumption, 86% was met by non-renewables: oil (32.9%), gas (23.8%) and coal (29.2%) [3].

Thus, these major oil and gas companies play a role in this world that needs to be celebrated.

 

Can they do more? Absolutely.

 

A few things BP is actively engaged in support of reduction in manifestation of climate change are described below:

A significant control in the greenhouse gas emission reduction can be achieved by changing the mix of non-renewables (one of the stabilization wedges presented by CMI). BP is playing a leading role in this direction. BP has been making huge investments globally in natural gas fields exploration and production. In addition to US, BP is engaged in gas field development in Egypt, in Oman and another mega-project that will create a new source of gas supply for Europe. “This is a $45 billion investment that is developing a natural gas field beneath the Caspian which is the size of Manhattan – and building a pipeline network that will run for 3,500km from Azerbaijan, across Georgia, Turkey, Greece and Albania and then under the Adriatic and into southern Italy” [4].

In addition, BP has been a proponent of carbon pricing system to the extent of its processes and uses carbon price of $40 per tonne to evaluate business [5].

Few other items BP is working on to reduce the carbon footprint is developing renewable energy resources and improving efficiency. In the renewables space, BP is investing in biomass and wind energy projects in Texas [6]. Some efficiency improvements have been made in its own E&P and downstream business and also end product (machine lubricants) to improve subsequent machine efficiencies. While there is lot of scope to build upon these initiatives; I think the most important role BP, and all the other major oil and gas players can play is in education and give unbiased support to scientific research and findings. “One of BP’s main academic partnerships in this area is the Carbon Mitigation Initiative (CMI). This is a 15-year partnership between Princeton University and BP that brings together some of the world’s leading scientists to advance climate science and explore potential low-carbon energy solutions “[8]. As important is the role the company plays in meeting energy demand of the world; equally valuable will be facilitating search for solutions to be able to achieve an optimal solution for today and tomorrow.

 

Word count: 669

[1] http://data.worldbank.org/indicator/EG.USE.PCAP.KG.OE?year_high_desc=false

[2] http://www.worldenergyoutlook.org/resources/energydevelopment/energyaccessdatabase/

[3] http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/coal.html

[4] http://www.bp.com/en/global/corporate/press/speeches/bridging-the-gap-between-current-realities-and-future-energy.html

[5] http://www.bp.com/en/global/corporate/sustainability/the-energy-challenge-and-climate-change/calling-for-a-price-on-carbon.html

[6] http://www.bp.com/en/global/corporate/sustainability/our-activities/renewables.html

[7] http://www.bp.com/en/global/corporate/sustainability/environment/energy-use.html

[8] http://www.bp.com/en/global/corporate/technology/technology-strategy/climate-change-research.html

Previous:

Anything but my beer

Next:

Could the Olympics solve Global Warming?

Student comments on BP: what should we expect?

  1. This is an interesting piece. Often renewables are praised in the climate change conversation. However, as you pointed out the majority of the world’s energy still comes from oil and gas. You also had a great point about energy being affordable for developing country, which is something I hadn’t considered. Clearly, firms like BP have a huge role in the climate change debate, both positive and negative. I would be curious to know what BP’s strategy for energy mix is in the next 10 – 20 years.

  2. Thanks for this perspective. I think, as Tracy points out above, it’s crucial for us sitting in mature economies with easy access to energy to discount the important need for affordable energy in developing countries.

    I am curious about two things. Firstly, I’m interested to know how BP can improve their operations in light of climate change challenges. Two important areas where BP can have a significant impact is in reducing methane emissions at natural gas sites and in developing carbon sequestration technology. One of the key concerns of the growing natural gas industry is the fact that natural gas, being a gaseous fuel, can escape into the atmosphere during fracking operations, creating a release of very potent greenhouse gases. I’m interested to know what else BP can do to tackle this. Secondly, having significant expertise in and access to underground geological formations, BP and other O&G firms have a distinct opportunity to develop and commercialize carbon sequestration technology that can help producers of CO2 emissions, namely large power plants, to capture and sequester CO2 underground so it cannot contribute to greenhouse gas levels. It would be interesting to learn more about BP’s advancements in these technologies.

  3. Really enjoyed this post.

    I think you point out a very fascinating tension between the wealthiest and most developed nations, who have spent the last century consuming massive amounts of energy (and continue to do so), and the restrictions that may be placed on other nations which may not be at the same stage of development or may not be able to afford the precipitous rise in energy costs. It is because of this fact that I believe oil majors, AND countries like the US are responsible for finding cleaner, more efficient, and more inexpensive ways to provide energy to the rest of the world.

    I liked the part about BP investing in climate change research, however I wonder what checks they have put in place to ensure this is truly unbiased. It reminds me of research recently done by the National Football League in the U.S. on concussions. Concussions threaten to conflict with the NFL’s business, and many argue that the research they are doing is biased and controlled.

  4. This is a great post, Akanksha! Too often developed societies take advantage of the benefits provided to them from traditional (and reliable) energy sources such as oil and gas. I think it is important to keep perspective and not lose sight of the fact that oil and gas supply 86% of the world’s energy needs. With all that said, it is critical that we continue to move forward on renewable energy source development and sustainability programs that ensure the long term viability of our planet. It is great to read about the steps BP is taking to accomplish that. The one area that I’d like to see more information on is the development of nuclear power because I see that as the only real competitor to oil and gas, in terms of energy supply capacity. Recognizing that nuclear power development is at odds with BP’s entire business, I’d love to learn more about how BP views the development of nuclear power and what steps it is taking to prepare for any advances in nuclear power that may occur in our future. Thanks for the insightful post!

  5. Dear Akanksha,
    Thanks for your blog post. I wrote a blog entry on the similar topic covering Shell — https://digital.hbs.edu/platform-rctom/submission/shell-the-impact-of-climate-change-on-an-oil-major/.

    Your blog was particularly interesting, as it pointed out on how the Oil majors and the entire Oil and Gas industry can make a definite impact in short-term towards reducing their impact on the climate. The oil and gas industry do need to diversify its operations, to encompass other sources of energy in their product mix — but, simply by changing the product mix between oil and gas can help us achieve substantial reduction in GHG emission in the early stage. It was interesting to see the efforts being placed by Shell into developing efficient Carbon Capture technologies. Carbon capture technologies can help industries capture CO2 emanating from their plans — thereby keeping their dependence on fossil fuels intact, but reduce their impact on climate. Such a move will keep the current interests of BP, Shell and the entire O&G industry intact.

    Regards,
    EK.

  6. Wonderful post Akanksha – thanks for sharing! I find the impact of climate change on oil and gas companies like BP to be especially interesting since climate change has been a direct result from their business model. While I agree that these sources still provide a significant majority of the energy in the world, we will only be able to move further towards renewable sources with additional investment so I would say BP has an obligation to invest heavily in the development of these sources. We are also seeing developing countries like India sign the recent Paris climate agreement so the entire world is moving in that direction. Like Tracy, I’d be really curious to hear how BP expects its energy mix to be in 20 years – whether they think they’ll still be primarily oil and gas or will they be able to change their business model to provide energy through renewable sources.

Leave a comment